National Development Minister Khaw Boon Wan said the recent tightening of property loan rules granted by financial institutions is a structural measure to ensure a more stable property market, and is expected to be “quite permanent”.
The new rules, which kicked in on Saturday, are also meant to ensure that monthly loan repayments by property buyers do not exceed 60 per cent of their income.
On Friday, Singapore’s central bank introduced a Total Debt Servicing Ratio (TDSR) framework and tighter Loan-to-Value (LTV) limits on housing loans. It said the move will strengthen credit underwriting practices among banks and encourage financial prudence among borrowers.
Mr Khaw said: “Our observation is I think those people buying for home ownership is not an issue, but we do have buyers who are stretching themselves, buying second property, third property for investments, and those are the people we worry about, because when interest rates go up, and when they find themselves (being unable to) afford the increased mortgage, what would they do? They may be forced to liquidate, and who knows, if that time combines with a time where there’s a bit of a glut in the property market, they may suffer financially. So I think the new rules are a good reminder.”
Mr Khaw also noted that the current low interest rate is not sustainable.
He said: “If you assume that today’s mortgage rate is 1.5 per cent, and let’s say you buy a property, let’s say your monthly mortgage is S$1,500. But it won’t stay 1.5 per cent forever… Interest rates will adjust and let’s say if it goes up to 3.5 per cent or 4 per cent or even higher, as not too long ago, then your monthly mortgage will suddenly increase in a very big way. And will you still be able to afford it? So I think all these prudential rules are very important, it’s for the interests of the buyers.”
Separately, he said the government is looking at ways to help multi-generational families live closer to each other.
New homes are being built in the north, in areas like Yishun, Sembawang and Woodlands, to enable the children and grandchildren to be able to buy properties near their parents or their grandparents.
Mr Khaw said: “But even outside of the north, I’m trying very hard to see where we can, to allow this strong social bonding to be nurtured. Let’s try to make it as much as possible to allow two-generation, three-generation families to stay close together. Not necessarily under the same roof but within the same HDB town or even better, within the same neighbourhood.”
Mr Khaw pointed out that a further expansion of Tampines is being planned, which will open up more opportunities.
He said: “Tampines is already a very mature town, with a big population there. As the children grow up, get married, and if we can enable them to buy property, HDB, near (the current) Tampines, in the form of Tampines North, I think that is wonderful. So Punggol is the same story, Pasir Ris is the same story.”
Mr Khaw spoke Sunday on the sidelines of the launch of the Sembawang Memory Project, initiated by the Sembawang GRC grassroots organisations.
Polytechnic students and youth volunteers will collect photos, artefacts and anecdotes from residents, which will be compiled into a book that is expected to be released next year. 100 residents will be participating in the project.
Source – CNA – 30 Jun 2013